By Ginika Igboke
President Donald Trump on Dec. 11 signed an executive order directing the Securities and Exchange Commission (SEC) to review and potentially roll back rules governing proxy advisory firms, arguing that the firms exert outsized influence over corporate decision-making while promoting political agendas at odds with investor returns.
The order instructs the SEC to examine—and, where appropriate, revise or rescind—any existing rules, guidance, bulletins, or internal memoranda related to proxy advisors that involve “diversity, equity, and inclusion” (DEI) or “environmental, social, and governance” (ESG) policies. Trump said such policies have increasingly shaped shareholder voting in ways that prioritize ideological objectives rather than financial performance.
Under the directive, the SEC is required to more aggressively enforce anti-fraud provisions of federal securities laws as they apply to proxy advisory firms. The agency must also evaluate whether proxy advisors should be required to register as investment advisers, disclose conflicts of interest more fully, or meet additional transparency standards.
The order further directs the SEC to assess whether proxy advisors are being used as a mechanism for investment advisers to coordinate voting decisions across large portfolios, potentially undermining market competition and independent judgment. In addition, regulators are instructed to review whether investment advisers breach their fiduciary duties when they rely on proxy advisors’ recommendations that are based on “non-pecuniary factors,” according to a White House fact sheet.
Focus on Major Proxy Advisory Firms
In the order, Trump specifically cited two foreign-owned proxy advisory firms—Institutional Shareholder Services (ISS) and Glass, Lewis & Co.—which advise institutional investors on how to vote shares in corporate elections. Trump alleged that the firms use their market dominance to advance “radical politically motivated agendas,” including supporting shareholder proposals that push U.S. companies to conduct racial equity audits or adopt aggressive greenhouse gas reduction targets.
“Their practices also raise significant concerns about conflicts of interest and the quality of their recommendations,” the order states. “The United States must therefore increase oversight of and take action to restore public confidence in the proxy advisor industry, including by promoting accountability, transparency, and competition.”
According to the order, ISS and Glass Lewis together control more than 90 percent of the proxy advisory market. Their client base represents a substantial ownership stake in many of the nation’s largest publicly traded companies, giving the firms significant sway over shareholder votes on corporate governance, executive compensation, and social and environmental policies.
Antitrust Review and Industry Scrutiny
Trump also directed the chairman of the Federal Trade Commission, Andrew Ferguson, to consult with the attorney general to review ongoing state-level antitrust investigations into proxy advisory firms. The review is intended to determine whether the firms may be engaging in unfair methods of competition or deceptive practices in violation of federal law.
ISS is majority-owned by Deutsche Börse Group, a Germany-based financial services company, while Glass Lewis is owned by Canadian private equity firm Peloton Capital Management.
The influence of proxy advisors has drawn scrutiny from corporate leaders as well. JPMorgan Chase CEO Jamie Dimon noted in his annual letter to shareholders last year that the two firms hold significant power over shareholder voting outcomes in the United States.
“These proxy advisors started out providing reams of data from companies to help their institutional investor clients vote on proxy matters,” Dimon wrote. “However, they soon also began to provide advice on how shareholders should vote on proxy matters,” raising concerns about their growing influence.
The executive order signals a broader effort by the Trump administration to curb the role of ESG and DEI considerations in financial markets and to reorient regulatory oversight toward what it views as traditional fiduciary and investor-return principles.
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